Edexcel A-Level Business A2 Unit 3 Business Decisions and Strategy Questions

Knowledge 1, Application 2, Analysis 1

Quantitative skills assessed: QS1 calculate, use and understand ratios, averages and fractions.

Knowledge 1 mark for knowledge and understanding of how to calculate ROCE:

(Operating Profit / Capital Employed) × 100 (1)

OR

Operating Profit / (Total Equity + Non-Current Liabilities) × 100 (1)

Application Up to 2 marks for correct application of figures to formula:

€3.4bn (1) / (€46.7bn + €24.4bn) (1) × 100

OR

€3.4bn (1) / €71.1bn (1) × 100

Analysis 1 mark for showing correct answer:

4.78% (1)

NB: If no working is shown, award marks as follows:

• If the answer given is 4.78% award 4 marks
• If the answer given is 4.78 award 3 marks

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
QS: QS8, QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- Economies of scale refer to the cost reduction experienced by
a firm when it increases its level of output
- Internal economies of scale include purchasing, technical,
marketing, managerial, financial and risk-bearing
- Bosch intends to open a new manufacturing factory in China to increase its supply of parts and systems for the electric car
market
- This may result in Bosch gaining purchasing economies of scale by being able to negotiate cheaper input costs of the
material for the car parts
- The increase in the number of employees at the new
manufacturing factory could result in managerial economies as it is able to afford to pay for more specialists, such as
marketing and IT personnel
- However, the new factory may not result in internal economies of scale and could in fact lead to diseconomies of scale
- An increase in the number of employees might result in poor
communication and coordination, resulting in higher average
costs for Bosch
- The new factory could have higher running costs and therefore Bosch may not see the cost savings as it expected

Level

Mark

Level 0

Level 1

1-2

Level 2

3-5

Level 3

6-8

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of the
points that candidates may make but this does not imply that any of these must
be included. Other relevant points must also be credited.
QS: QS8 and QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- A SWOT analysis involves analysing the internal strengths and
weaknesses of a business and the external opportunities and threats
that it faces
- Strengths describe what the business excels at and what separates it
from competition
- A business strength of Bosch is its innovation which may allow it to
make advances in the manufacturing and technology market. This
may create a competitive advantage for Bosch
- Opportunities refer to favourable external factors that can be taken
advantage of to generate revenue and profits for a business
- The growth of the electric car market gives an opportunity to Bosch
to use its experienced employees and its leading position in the
market to profit from this growth
- Bosch faces threats from competition in the automotive supplier
market plus other threats from rising costs and supply chain
problems. Bosch must keep these threats in mind when making
strategic decisions
- However, categorising aspects as strengths, weaknesses,
opportunities and threats might be very subjective as there is a great
degree of uncertainty in the market especially with the recent global
health crisis
- SWOT analysis may have limited value to plan strategically. Bosch is
not in control of external factors such as material price increases and
supply chain delays which can have a significant impact on its
success
- Although opportunities of the growing electric car market can be
identified, Bosch may not have the necessary capital to take full
advantage of the opportunities
- The process needs to be repeated on a regular basis and is time
consuming. As Bosch operates in fast moving and dynamic markets,
the pace of the changes may make a SWOT analysis unfeasible
- A SWOT analysis is useful to provide an overview of a business but
should be used in conjunction with other strategic research tools,
such as a PESTLE analysis which looks closer at external influences
on a business
- There are other methods such as Ansoff and Porter's Strategic Matrix
which are used to assist with strategic decision making
- A combination of these models would help Bosch make decisions on
its future strategy

Knowledge 1, Application 2, Analysis 1

Quantitative skills assessed: QS1: calculate, use and understand ratios, averages and fractions.

Knowledge 1 mark for knowledge and understanding of how to calculate ROCE:

(Operating profit / (Non-current liabilities + Total equity)) ×100 (1)

Application Up to 2 marks for correct application of figures to formula:

(126.9 (1) / 267.3 (1)) × 100

Analysis 1 mark for showing correct answer: 47.47% (1)

NB: If no working is shown, award marks as follows:

• If the answer given is 47.47% award 4 marks
• If the answer given is 47.47 award 3 marks

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Dunelm offers employees the chance to purchase shares at a discount in the
business which may result in employees working hard as they own part of
the business
- Financial rewards can provide an incentive for employees to stay at Dunelm
and can help to increase productivity levels in the superstores
- Dunelm not only provides financial rewards but offers a range of
non-financial rewards such as the empowering female leaders programme,
regular meetings where employees can consult with management and are
informed of events in Dunelm
- Not everyone is motivated by money so by offering a range of human
resource strategies, Dunelm might be able to appeal to all its employees in
terms of motivation
- By offering such a wide range of HR strategies, Dunelm may see an overall
decline in labour turnover and a related improvement in productivity and
good customer service
- However, offering such a wide range of incentives may add to Dunelm's
labour costs which could put Dunelm at a competitive disadvantage with
other businesses selling home products
- Management time will be needed to ensure all of these strategies are
implemented effectively for all the 9,000 employees
- The effectiveness of offering such a wide range of HR strategies will depend
upon how Dunelm compares to other retail businesses in the same industry
or similar industries
- If employees can earn higher wages or have better working conditions in a
rival business, then Dunelm may still have to spend time recruiting new
employees


Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-2

Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.

Level 2

3-4

Elements of knowledge and understanding, which are applied to the
business example.
Chains of reasoning are presented, but may be assertions or
incomplete.
A generic or superficial assessment is presented.

Level 3

5-8

Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or
qualitative information though unlikely to show the significance of
competing arguments.

Level 4

9-12

Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or
effect(s).
Assessment is balanced, wide ranging and well contextualised, using
quantitative and/or qualitative information and shows an awareness of
competing arguments/factors leading to a supported judgement.

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Corporate culture is the set of important assumptions that are shared
by people working in a particular business and that influence the ways in
which decisions are taken
- Extract E shows that Dunelm has an open and straightforward culture,
with strong ethics based on the values of the founding Adderley family
- Dunelm monitors its culture twice a year and all employees at Dunelm,
including the Board, are expected to follow its corporate culture
- By having a strong and open culture, employees are likely to be more
positive and feel that Dunelm cares about its stakeholders
- There could be an increase in employee engagement/motivation at
Dunelm if employees see that culture comes from the top down and is
valued by the business
- However, as the size of Dunelm grows it might be more difficult to keep
the original corporate culture in all of its 172 stores
- Corporate culture alone does not guarantee the financial success of
Dunelm and there are many other factors which contribute to the
success of a business
- The wider economic environment may have more of an impact on the
success of Dunelm rather than its corporate culture
- In order to be successful, Dunelm must ensure it continues to offer the
products and prices that customers want as well as maintain its original
corporate culture


Level

Mark

Descriptor

0

No rewardable material.

Level 1

1-2

Isolated elements of knowledge and understanding - recall based.
Weak or no relevant application to business examples.
Generic assertions may be presented.

Level 2

3-4

Elements of knowledge and understanding, which are applied to the
business example.
Chains of reasoning are presented but may be assertions or
incomplete.
A generic or superficial assessment is presented.

Level 3

5-8

Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
Analytical perspectives are presented, with developed chains of
reasoning, showing cause(s) and/or effect(s).
An attempt at an assessment is presented, using quantitative and/or
qualitative information though unlikely to show the significance of
competing arguments.

Level 4

9-12

Accurate and thorough knowledge and understanding, supported
throughout by relevant and effective use of the business
behaviour/context.
A coherent and logical chain of reasoning, showing cause(s) and/or
effect(s).
Assessment is balanced, wide ranging and well contextualised, using
quantitative and/or qualitative information and shows an awareness of
competing arguments/factors leading to a supported judgement.

Knowledge 1, Application 2, Analysis 1
QS9 Interpret, apply and analyse information in written, graphical and numerical forms
Knowledge
1 mark for identifying one reason, e.g.:
Application
Up to 2 marks for contextualised answers, e.g.:
- Lush pre-tax profit has increased from £45m loss to £29m profit (1)
Analysis
1 mark for developing the reason, e.g.:
- Shareholders will be able to see if the business has
improved over the financial year/if dividends will be paid
(1)

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
QS: QS8, QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- Financial resources are used to finance a business strategy and can include
cash, current assets and the ability to borrow finance for future operations
- Extract C states Lush may lose £10m in sales from the decision to stop using social media platforms
- This could result in Lush having a short-term problem with its cash flow as fewer products might be sold due to a lack of awareness
- Social media platforms are a good way to promote a business and create
demand for products so not using them might have financial implications
- Many of these platforms are used by teenage girls who are a key consumer for Lush
- This could result in Lush requiring short-term sources of finance to support
its liquidity during this time
- By removing itself from social media platforms it is demonstrating it is taking an ethical stance and could be part of its CSR policy
- Lush is investing in its retail outlets which could offset any drop in sales
caused by this decision
- Extract C states that Lush is well-placed after the global health crisis and
could therefore withstand any short-term liquidity issues

Level

Mark

Level 0

Level 1

1-2

Level 2

3-5

Level 3

6-8

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
QS: QS8 and QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- Employee share ownership is when part of the business is owned by the
company's workforce
- Lush has given 10% of the business to its employees in the form of the Employee Benefit Trust (EBT)
- Extract D states the purpose of the EBT and how this could be of mutual benefit to Lush and its employees
- The EBT could create incentives in the form of employee motivation and productivity because the employees at Lush will benefit financially from their own efforts and have a stake in the business
- The EBT could reduce labour turnover because it gives every Lush employee a voice and rewards employees for remaining in the business
- By owning a share in Lush, employees might be less likely to move to
competitors in the same industry therefore improving retention
- However, the value of shares can decrease therefore it will reduce the
incentive to remain at Lush
- Only 10% of shares have been given to employees which does not give
employees enough power to really influence decision-making at Lush
- For many employees, good working conditions, pay and promotional prospects are more important than share ownership to persuade them to stay at a business
- There are other ways to improve retention such as empowerment strategies and consultation, which might be more effective and do not require ownership to be given to employees
- A combination of financial and non-financial human resource strategies
might be the best way to reduce labour turnover as employees are often
motivated by different factors

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the general marking guidance. The indicative content below exemplifies some of the points that candidates may make but this does not imply that any of these must be included. Other relevant points must also be credited.
QS: QS8, QS9
Knowledge, Application, Analysis, Evaluation - indicative content
- Stakeholders are people or groups who have an interest in the actions of
a business. They include owners, employees, customers, suppliers, local
community, the government and environmental groups
- It can be argued that Lush does consider its stakeholders when it makes
decisions with Extract E stating what Lush believes in and how it affects
many of its stakeholder groups
- Lush insists that its suppliers do not test on animals and that Lush cares for the environment by the decisions it makes about the ingredients that go into its products
- Customer needs are important and Extract E states that products should be good value and the customer is always right
- Although Lush is known for its ethical values, it still aims to make a profit as a company and reward shareholders when it can, by its decision to
invest into the business in order to grow it
- Extract D shows how employees are given a share in the business and the opportunity to voice their opinion which demonstrates that employees are considered when making decisions at Lush
- However, it could be argued that even though all stakeholders are
considered to some extent in its decisions, the most important stakeholder group is still the shareholders and decisions will be made with them as the priority
- Lush is a company and so has responsibilities to make a return on
investment for its shareholders and perhaps the decisions affecting other stakeholders are really made to benefit the shareholders
- Revenue has fallen in recent years and a decision not to pay dividends to shareholders was made to reflect this
- Lush has donated £6.3m to several charities which could reduce
dividends to shareholders
- Lush is continuing to invest in its retail outlets and expand via health spas and hairdressers which shows that revenue and profit are still a
major objective and priority for the business
- In conclusion, Lush is not a typical business and has ethics at the heart of its culture and although it does probably consider the impact of its
decisions on all of its stakeholders, its shareholders are likely to be the
most important

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- A mission statement is an expression of corporate aims describing the
overall aspirations of a business
- Peloton's mission sets out what the business does by stating that they want
to connect the world through fitness and how they are going to meet the
needs of the customer by empowering people to be the best versions of
themselves
- Peloton's mission statement is simple and clear and could act as a
motivator within the business
- This simple mission statement could encourage employees at Peloton to
work together towards one common goal of increasing productivity
- Peloton's mission statement could act as a signal to all stakeholders that
Peloton knows what it is doing and is on the right track
- However, often mission statements are too vague or unrealistic to be of
use
- Resources spent developing Peloton's mission statement could be better
used in other areas of the business such as lowering the price of fitness
subscriptions rather than being a simple PR exercise and a waste of time
and money
- An unrealistic mission statement can be demotivating as employees
struggle to meet its demands

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Knowledge, Application, Analysis, Evaluation - indicative content
- Inorganic growth is the expansion of a business by takeovers and
mergers
- Extract D states that Peloton has taken over Precor, a fitness equipment
manufacturer in the US
- Horizontal inorganic growth of this type is a rapid means of expansion
and can allow Peloton to grow faster in the global commercial market
rather than by organic growth alone
- This can be important when expanding in dynamic markets such as the
growing online workout market
- Inorganic growth reduces the competition from Precor that is already
established in the US commercial fitness market
- By taking over Precor, Peloton instantly had access to the supply and
distribution networks in Precor's 90 countries including new locations
such as hotels and universities
- This saves Peloton time and costs in setting up its own distribution
networks
- However, inorganic growth is thought to lead to improvements in only
50% of all mergers and takeovers
- There may well be clashes of corporate culture between Peloton and
Precor employees as some may be resistant to change
- There could be diseconomies of scale from problems in coordination
and communication as the business grows
- This takeover could increase the risk for Peloton as it moves away from
its core competency of bikes and treadmills and online fitness classes
- The takeover was $420m so there could be an opportunity cost from the
takeover which could have been spent on growing organically
- Even the best planned of takeovers and mergers may be fraught with
problems in the short term

Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of
the points that candidates may make but this does not imply that any of these
must be included. Other relevant points must also be credited.
Quantitative skills assessed:
QS9: Interpret, apply and analyse information in written graphical and
numerical forms
Knowledge, Application, Analysis, Evaluation - indicative content
- Stakeholders are people or groups who have an interest in the actions of
a business
- Internal stakeholders include employees, managers, board of directors
and the owners of the business
- Due to the negative publicity, the share price decreased by 15% and
wiped $4.1bn from Peloton's market value
- This may result in some Peloton shareholders wanting to sell shares as
the market value has decreased and they lose faith in the board of
directors
- Peloton's CEO John Foley admitted to not responding quickly to the initial
discussions with the CPSC which may result in negative consequences
for him and the board of directors who are responsible for important
strategic decisions such as this
- Employees might be negatively affected as the business could see sales
fall in the future which could impact on job security, wages and
promotional prospects at Peloton
- However, although the share price did fall after this announcement, the
chart in Extract E shows that this was temporary, and the share price did
increase in the months after the recall
- Demand for Peloton's products continues to grow as does the business
in a range of international markets
- Extract B indicates Peloton has over $3bn in revenue and its operating
profit from 2020 to 2021 has significantly increased indicating it can
withstand any short-term financial implications from the recall
- The online virtual fitness industry is set to continue to expand so all the
internal stakeholders at Peloton should see relatively little impact in the
long-term from the recall of the treadmills if managed well by the board
of directors